Projects and operations in project-based organizations

Projects and operations

It is also important to know and understand projects and operations in the context of project-based organizations.

But let’s start with the classic view of projects and operations: an organization has strategic management, operations, functional support services, and some projects.

On one side, you have the operations:

Operations management is responsible for overseeing, directing, and controlling business operations. Operations evolve to support the day-to-day business, and are necessary to achieve the strategic goals of the business. / PMBOK 5th edition, p.12

On the other side, you have projects:

Changes in business operations may be the focus of a dedicated project – especially if there are substantial changes to business operations as a result of a new product or service delivery. Ongoing operations are outside of the scope of a project. / PMBOK 5th edition, p.12

If you are studying for your PMP exam, this is your starting point. You have to know the standard answer.

The Manufacturing World

The best example of this type of organization is a manufacturing plant. You can also include any business with a standard product or services that is defined and NOT subject to significant changes over a long period of time.

The key factor is to consider is the ability to standardize the operations. It is possible for these type of organization to define, standardize and document what will be done. You establish the proper business processes, start the operations, and then enjoy the benefits over a long period of time.

A key assumption that is often forgotten : you need to be in a business environment that is stable and predictable over a sufficiently long period of time. This was a good representation of the business world up to a few years or decades ago. It may not be the case as often as wished in today’s world. But that’s the beauty of assumption. They are taken for granted, included as a foundation in most book, and should not be questioned.

However, it should be noted that the pace of changes has increased significant. We have faster discovery and innovation, changes in technology and change in the business and social environment. It is become more rare that you can just build a plant, manufacture something for 20 years, and enjoy the benefits, with just a few minor projects here and there.

The biais of personal experience

An easy mistake that can often be done by anybody is to simplify too much and extrapolate solely based on our own experience. A project manager who only worked in a manufacturing environment will often make a hard distinction between projects and operations. Just as much, someone who only worked in implementation projects will often think that all projects should be managed like those types of project, and will disregard the different nature of design and innovation projects.

It is true that in many organizations, operations is at the core of the business, and projects are the distinct special initiatives. However, it is also true that not all organizations are designed like a manufacturing plant, or a well defined and repetitive services.

Project-based organization

You can find organizations that the core of the operations, which is the part of the organization that generates revenues, is all project-based. Project-Based organization sell their services as projects, manage and allocate resource on projects, monitor and control performance per project, and invoice per project. Example of project-based organization includes among others :

Construction

Graphic designers

Accounting firms

Law firms

Business consulting

wedding planner

photography

many arts activity: studio record of an album, a tour, a festival, an exposition

In all those activities, contracts, management and revenues are all managed per projects. The success of the organization depends on their ability to deliver successfully a project, and then get their next contract for a new project. The element of repetition and predictability is missing. As an example, a business consultant does not know what activity he will do on the first Wednesday of February in a year from now.

An interesting note: I often find comments from other project managers that works in a project-based organization, yet they only know the classic manufacturing model and insist on the pure distinction between operations and projects. If at least they were in a manufacturing or other organization with the ongoing well-defined operations. But they work as business consultant or other type of work based on project! In that case, projects are the operations. If no more projects, then the operations shut down and the business die. That is the nature of a project-based organization.

Projectized organization

Most project-based organizations are structured as projectized organization.

In projectized organization, the organization structure is often based on projects. Senior members are project managers and responsible for managing client relationships and obtaining new contracts that will be performed as a project. In a projectized organization, the project manager has full authority on the resources and direct the work assigned. Performance is managed based on the results of projects. The operations, defined as the part of a business that generates the revenues, is project-based.

In this kind of organization, work changes constantly, and a person must be good at managing project, clients and communication.

In a project-based organization, the organization will close its door as soon as it cannot find new projects. Its life depends on projects.

Discussion

Have you worked mostly in an organization that has an ongoing operations and special projects, or have you worked in a project-based organization? Do you have any preference? Share your thoughts in the comments.